Here's Phil's mercifully brief apologia for John Boy. Key, argues Sage, "has succeeded in the biggest genuine open market of all - currency trading. Sound ideology does not count [in such a market]. What works counts. " At this stage you can almost here the word "therefore" being polished up for use, even if the effect is only the following non sequitur: "I think he will bring that [same] approach to bear on NZ politics... The same things apply to making money long term in currency markets as applies to running a successful economy, spotting and getting ahead of global trends."
Now, all credit to John Boy for his success as a currency trader, but only a moron could equate trading currencies successfully with "running a successful economy," the goal as such a trader being very much narrower, and requiring no "ideology" beyond the necessary commitment to making money rather than losing it. It's a truism a six-year-old would understand to say that "ideology does not count" in such a market.
Anyone however suggesting that the same things apply to making money in currency markets as applies to attempting to run an economy from the Beehive can only be considered dim, if not totally braindead.
Indeed, after several centuries of failure at the job, only a moron or a National Socialist (or Jim Anderton) would look to or expect a politician to "pick winners" or to "run an economy," let alone expect any success from such a venture -- even Tony Blair and Michael Cullen seem to understand this much, however dimly. As the industrial Legendre answered when asked by Louis XIV's economic dictator Jean-Baptiste Colbert what he could best do to help him and his fellow industrialists, "Laissez-nous faire!" -- leave us alone!
"What works" in currency trading is clearcut: ie., ensuring you advance your trading positions. "What works" in politics however is very different, and very far from clear cut -- and politicians "picking winners" let alone "running a successful economy" is emphatically not something that works. Never has. "What works" with an economy is not tinkering (or worse), it is leaving entrepreneurs and industrialists alone to either back or become their own winners.
Many politicians have tried to fake reality, have tried themselves to "run" a successful economy. Stalin. Roosevelt. Stafford Cripps. Robert David Muldoon.
All tried. All failed.
To venture such a thing, for whatever motive, is to totally misunderstand the difference between political power and economic power, or (in the case of Stalin) to rely upon that misunderstanding in others. As Harry Binswanger points out so memorably, the symbol of political power is the gun, whereas the symbol of economic power is the dollar. There is a distinct difference between the two.
The only power a business has to induce customers to give it money is the value of its products. If a business started to produce an inferior product, it would eventually lose its customers. By contrast, the only power that the government has to offer is a threat: "We'll dictate what businessmen can and cannot do—and businessmen better toe the line or we'll throw them in jail."Muldoon was a man who never understood the distinction, but who enjoyed the effect of making such threats. I once heard a radio interview with Muldoon in his prime. Running an economy, he said, was rather like driving a car. He had no idea, he boasted, what pushing the pedals and playing with the car's knobs actually did 'under the bonnet', and nor did he need to (in other words, he had no interest in what actual effect his threats had on those he bullied) -- all he needed to know was the effect of the levers being pulled and the pedals pushed -- that is, the effect of his threats as far as his latest prescription for economic rescue was concerned.
As many of us will still recall, the long term effect of more than a decade of Muldoonist intervention was not something that could be described by the word "works," let alone "successful." The result instead was the creation of a minor economic dictator, of businessmen and journalists like scared rabbits, and of an economy like a Polish shipyard. The worry is that John Boy sees himself in the same mould. Not necessarily as an economic dictator in the completely Muldoonist mould, but certainly as a meddler. A tinkerer. One able and willing to try and pick winners and to run the economy from the Ninth Floor of the Beehive.
Not even Alan Greenspan with all the many levers at his command would ever have countenanced such a thing.
Muldoon didn't fail at economic management because he was no good at economic management; he failed because economic management and economic planning by government must always fail -- because only individuals acting in their own interests have the knowledge and the 'asymmetric information' to entrepreneurially plan their own lives and their own efforts ... and because only individuals have the right to do so. As Friedrich Hayek observed:
The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.In other word, it is not given to anyone to know all that would be necessary to run an economy, no matter how good a currency trader he or she once was or how vicious the threats he or she os prepared to make. As Ludwig von Mises points out in Planning for Freedom, it is not the government that runs the semi-capitalistic economy we enjoy and from which we all benefit, but the sum of voluntary choices made by individual actors, ie., the market.
It [is the market that] directs each individual's activities into those channels in which he best serves the wants of his fellow-men. The market alone puts the whole social system of private ownership of the means of production and free enterprise in order and provides it with sense and meaning... All that good government can do to improve the material well-being of the masses is to establish and to preserve an institutional setting in which there are no obstacles to the progressive accumulation of new capital and its utilization for the improvement of technical methods of production.Who runs the economy? Not politicians, they just get in the way. Who really runs the economy? You do. You run your part of the economy every time you make an economic choice, every time you save or invest, or produce or consume a good or a service. The sum total of the spontaneous order created by such choices is what creates an economy, not the ignorant meddling of politicians -- which invariably serves only to get in the way of such freely-made choices.
In short then, it is not "economic management" that is wanted from government, or from those who would aspire to be in government: It is the institutionalisation of the rule of law, offering legal protection for the economic choices we make, and then getting the hell out of the way.
Recognising and implementing such a thing is what is known as taking a principled stand. If nothing else, Don Brash understood if not fully endorsed such a role for government, and to that principled stand New Zealanders responded -- to such an extent that he doubled National's vote at the last election from that achieved by its current deputy leaderette at the previous election.
"I do not expect Peter Cresswell to endorse John Key any time soon," observes Sage. He got that much right.
LINKS: The use of knowledge in society - FA Hayek, Library of Economics and Liberty
Planning for Freedom - Ludwig von Mises, Mises Institute [book]
Cue Card Libertarianism: Power - Not PC
RELATED: Politics-NZ, Politics-National, Hollow_Men